Small Talk

How entrepreneurs can attract capital and thrive

Looking for investment capital to help your business achieve financial stability? What does it take to unlock growth? Are you prepared, and what are investors looking for?

As part of Crain's Detroit Homecoming, these questions were discussed last week at a session focused on unlocking growth and attracting capital among high-growth investors and minority entrepreneurs.

The well-attended event, presented by the Goldman Sachs 10,000 Small Businesses Program at Wayne State University, highlighted three Detroit-area businesses. It was an opportunity for local Detroiters and expats to intermingle and hear from local entrepreneurs and a venture capitalist with respect to attracting venture capital funding.

Among the Metro Detroit entrepreneurs highlighted were Clifford A. Brown, managing partner of Woodborn Partners; James Norman, co-founder of Pilotly; and Michael Duncan, founder and CEO of Bankjoy. The featured speaker was venture capitalist Kesha Cash, founder and general partner of Oakland, Calif.-based Impact America Fund.

I sat down with Cash to discuss venture capital opportunities and challenges confronting minority-owned businesses.

"The underlying business is less about the technology itself and more about the community around the technology, meaning how do you get excited to use technology to update infrastructure or find efficiencies within an existing business model?" Cash said.

The firm focuses on technology utilization because it brings transparency and solutions to business challenges and identifies opportunities across various market segments and a spectrum of diverse communities.

And she believes Detroit is an attractive market because its entrepreneurial foundation continues to be strengthened by resolve, enthusiasm and a burgeoning small-business ecosystem.

"There is a real focus on providing or building an ecosystem around entrepreneurship," she said, "and having inclusive events are essential in attracting people to and back to Detroit."

Because of this enthusiasm and an invitation from Jill Ford, the City of Detroit's head of Innovation and Entrepreneurship, Cash wanted to come to the Motor City to hear and see the city's progress first-hand while spreading her firm's message of assisting and supporting entrepreneurs in attaining financial stability and achieving growth.

While all businesses go through various cycles, what happens when your business faces a cash crunch and business instability?

Cash offered the following advice:

Take a step back to have an opportunity to reflect and to analyze how cash is being spent

Understand who your key customers are based on profitability. In other words, you may not be serving the most profitable customers based on your business model and thus, can be putting a drain on profitability

Have the opportunity and your business shifted and evolved over the last five years? Many entrepreneurs have not adjusted based on market dynamics, such as demand and competitive forces, which can lead to financial challenges

Find a value proposition for the products being offered. Is it distinct and still relevant to customers? If not, focus on product relevance and a customer proposition desired by your customer base.

While her firm makes equity investments, primarily ranging from $250k to $500k and in some cases up to $2 million, IAF's intent is to exit within seven to 10 years.

But before you attract VC funding, your business has to be ready.

What does it take?

It takes more than just having great ideas, according to Cash, but more importantly, you need a plan and an understanding of venture capital expectations and ultimately what it takes for an investor to exit within seven to 10 years.

When that happens, you have an opportunity to receive funding and potentially unlock and achieve significant growth.